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Bear Stearns profits plunge 61% amid credit crunch

Bear Stearns on Thursday reported 61% drop in third-quarter net income - its lowest quarterly profit in five years - as US credit crunch claimed another Wall Street victim.

The groupâ€™s net income dropped to $171m (â‚¬121.4m), as it reeled from a $200m charge relating to the collapse of two hedge funds in the summer that fell victim to US sub-prime mortgage meltdown.

Bear Stearns was knocked further by an 88% slump in revenues at its fixed-income division, to $117.6m, as a â€œgeneral re-pricing of risk in the marketâ€? knocked the value of its credit-related investment portfolio and significantly reduced the volume of mortgage-backed bonds it traded, James Cayne, the groupâ€™s chief executive, said.The groupâ€™s net revenue fell by 37% to $1.3bn, as investment banking fees dropped by 9% to $211m.

But the groupâ€™s profits were helped by a strong performance from its equity sales and trading division, which reported a 53% increase to a record $719m. Meanwhile, the clearing unit, which includes the provision of brokerage services for hedge funds, jumped by 30% to $332m, another record.

Bear Stearns is considering cutting Wall Street jobs after the collapse of its quarterly profit. The bank said it would review costs before the end of the year, as it scales back its exposure to riskier parts of the debt markets and works to shore up its tattered reputation in hedge fund management.